The Research On The City House Price Bubbles In China

Last ten years have witnessed the high-speed development of realty business and the soaring housing prices in big cities in China.Since most people hold that the housing price will continue to go up beyond all doubt, in al2probability there exsits bubbles in the housing market. Both the finance crisis in the year2008triggered by the burst of housing bubbles in America and the economic depression caused by the the burst of housing bubbles in Japan warn us to pay high attention to the housing bubbles in Chinese big cities. Under such backgroud the research on the housing bubble is very important.With mathematical models and empirical approaches, this paper studyies the phenomenon of high housing prices in Chinese big cities, focused on three questions:Are there bubbles; how to measure bubbles; why there are bubbles. First, this paper summarizes the general features of housing bubbles which are very different from other investment goods bubbles because of dual nature of house. Second, two models are built to measure bubbles. Based on the consuming demand the real value model is built, and based on the investment demand the bubble value model is built. Third, three empirical methods are used to test the housing bubbles. Among all the indictators, the Price-Income Index is the most appropriate one. Compared with other methods, the econometrica method can distinguish real value and bubble in the housing prices. Last, the reasons for bubble generation are analysed.The reasearch finds that there do exsits bubbles in housing prices,and the soar of housing prices can not be supported by the ecomomic bases. The bubbles can explain more of the fluctuation of the housing prices than the economic bases do.We hold that the main reason for the bubble generation is land finance. Our research provides direct evidence for understanding the housing bubbles in Chinese big cities.